Gold investors shift to platinum for higher profits

With gold losing its safe haven status due to global economic uncertainty, profit-wary investors have started picking platinum as an alternate investment option, anticipating high price escalation. Consequently, platinum retailers like RiddiSiddhi Bullion (RSBL), Gitanjali Gems and Orra have seen 5-10 per cent of existing customers shift from gold to platinum products.

Platinum was trading at a premium of almost 100 per cent over gold early this decade. But, gold's close link with the global economic scenario has pushed prices up, pulling the white precious metal into a discount. In September, gold overheated to trade with a premium for the first time in a decade and this has sustained. On December 19, gold was trading at $1,598 an ounce, whereas platinum was trading at $1,419 an ounce in London.

"Platinum has witnessed a sharp growth over the last two years for several reasons. One is that consumer's familiarisation and knowledge about platinum has grown. The second and crucial point is the current price advantage of platinum over gold. With gold prices surging, the difference in the rate per gramme has either been on par or a bit less and, hence, many are opting for platinum jewellery. Hence, precious metal consumers are skewed towards platinum," said Vaishali Banerjee, manager (India), Plati-num Guild International (PGI), the premier trade body.

"There are two aspects of the rapid growth in consumers' demand. Upstream consumers have discovered platinum as an alternative source of investment, with high resale value. This is the longest period for platinum to remain either at par or even lower than gold. This offers a wonderful opportunity for inve-stors to enter into platinum," she added.

Gold, linked more with global economic scenario than actual demand and supply, slumped from $1,900 an ounce to trade below $1,600 without any significant change in the world economy. In contrast, platinum has witnessed a sustainable and marginal volatility in line with the auto sector.

In India, platinum demand is growing due to expansion of the auto sector in a big way. The catalytic converter (auto catalyst), the largest application of the metal, acts as a catalyst to reduce levels of carbon monoxide, hydrocarbons and oxides of nitrogen.

Auto makers worldwide account for more than 60 per cent of platinum demand. According to estimates, world production of platinum is 180 tonnes, around seven per cent of the total gold production and just one per cent of silver.

Leading platinum jewellery manufacturers like Orra have been targeting consumers in the age group of 25-40 years with high disposable income, as the white metal gives more pride than any other precious metals on Tuesday. According to Vijay Jain, CEO, Orra, "A large number of both, bangles and eternity jewellery items, of platinum are sold."

Many wedding couples and their parents have started preferring platinum jewellery over traditional gold jewellery, as the former has become affordable and frequently accessible. Platinum jewellery items of various size, type and weight are available with almost every mid-size jewellery maker and seller in Tier-I and Tier-II cities.

Therefore, analysts estimate the demand for platinum in India may increase to 15 tonnes by the end of FY11 as against 10 tonnes during 2008-09. This year, Jain estimates a 50 per cent increase in demand.